Financial Accounting Valix and Peralta Volume Three 2008 Edition 1

CHAPTER 1
Problem 1-1 Problem 1-3 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. D B C A A D B C D B 1. A 2. B 3. D 4. D 5. D 6. C 7. B 8. A 9. A 10. A Problem 1-5 1. 2. 3. 4. 5. A A A A C Problem 1-2 1. C 2. 3. 4. 5. 6. 7. 8. 9. 10. D Problem 11. D 2. 3. 4. 5. C B D C C C A D D D C B

SOLUTION MANUAL

Problem 1-4 6 1. 2. 3. 4. 5. C D B C C

CHAPTER 2
Problem 2-1 Problem 2-3 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. C A D A C D B A A D 1. 2. 3. 4. 5. C B D A C Problem 2-2 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Problem 2-5 D D C B B D B B D D

Problem 2-4

1. C 1. A 2. A 2. B 3. A 3. C 4. A 4. A 5. B 5. A 6. F 6. B 7. F 7. E 8. B 8. E 9. E 9. E 10. E 10. B Problem 2-6 1. Noncurrent asset as part of intangible assets 2. Other noncurrent asset 3. Addition to bonds payable under noncurrent liability 4. Noncurrent asset as part of property, plant and equipment but with disclosure that the building construction is in progress. 5. Noncurrent asset as part of intangible assets 6. Deduction from shareholders equity 7. Deduction from shareholders equity 8. Current asset 9. Current liability 10. Deduction from property, plant and equipment 11. Current liability 12. Shareholders equity as part of reserves 13. Noncurrent asset as part of property, plant and equipment 14. Noncurrent asset as part of property, plant and equipment 15. Deduction from beginning balance of retained earnings

Problem 2-7 Answer A Accounts receivable Trading securities Cash and cash equivalents Inventory Prepaid expenses Problem 2-8 Answer B Cash and cash equivalent Trade and other receivables (1,200,000 minus 260,000) 940,000 Inventories (600,000 + 200,000) 800,000 Total current assets 2,440,000 Adjustments 1. Sales Accounts receivable 2. Inventory (260,000/130%) Cost of goods sold Problem 2-9 Answer C Cash (1,500,000 - 500,000) 1,000,000 Trade and other receivables Inventory (2,000 000 - 200,000) Total current assets 5,800,000 Problem 2-10 Answer B Cash and cash equivalents Trade and other receivables Inventories Prepaid expenses Total current assets 4,850,000 Customers accounts Allowance for uncollectible accounts Employees account, current Total trade and other receivables 1,150,000 1,800,000 1,150,000 1,700,000 200,000 260,000 260,000 200,000 200,000 700,000 200,000 100,000 150,000 500,000 20,000 970,000

3,000,000 1,800,000

1,050,000 ( 50,000) 150,000

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Problem 2-11 Answer A Cash Accounts receivable Inventory Prepaid expenses Land classified as held for sale Total current assets 2,250,000 200,000 350,000 580,000 120,000 1,000,000

The undelivered checks amounting to P300,000 should be adjusted by reversing the original entry as follows: Cash Accounts payable 300,000 300,000

Accordingly, the adjusted cash balance is P200,000 (P300,000 minus the overdraft of P100,000). Under PFRS 5, a noncurrent asset classified as held for sale is presented as current asset. Problem 2-12 Answer A Cash and cash equivalents 209,000 Trading securities Trade receivables Merchandise inventory Prepaid expenses Total current assets 2,011,000 Accounts receivable (808,000 + 40,000) 848,000 Notes receivable Note receivable discounted Allowance for doubtful accounts Total trade receivables Problem 2-13 Answer B Cash Notes receivable Note receivable discounted Accounts receivable unassigned Accounts receivable assigned Allowance for doubtful accounts Inventory (2,800,000 600,000) Total current assets 8,400,000

143,000 853,000 796,000 10,000

100,000 ( 80,000) ( 15,000) 853,000 2,000,000 1,200,000 ( 700,000) 3,000,000 800,000 ( 100,000) 2,200,000

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The equity of the assignee in assigned accounts should not be offset against the assigned accounts receivable but should be included in current liabilities. Problem 2-14 Answer A Current assets per book Bank overdraft Cash set aside from plant site Goods held on consignment Cash surrender value Adjusted current assets 7,300,000 300,000 (2,000,000) ( 150,000) ( 50,000) 5,400,000

The bank overdraft should not be netted against the cash in bank but should be classified as current liability. The writeoff of the accounts receivable has no effect on current assets. Problem 2-15 Answer C Accounts payable Dividends payable Income tax payable Note payable Total current liabilities 1,900,000 500,000 900,000 600,000 3,900,000

Under PAS 1 and PAS 12, a deferred tax liability is classified as noncurrent. Problem 2-16 Answer A Accounts payable (4,000,000 + 100,000) 4,100,000 Accrued expenses 1,500,000 Credit balances in customers accounts 500,000 Estimated liability for coupons Total current liabilities Problem 2-17 Answer C Accounts payable Bonds payable Premium on bonds payable Dividends payable Income tax payable Note payable bank Total current liabilities 5,000,000 10,000,000 500,000 4,500,000 1,500,000 4,000,000 25,500,00

600,000 6,700,000

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Problem 2-18 Answer D The 10% note payable is classified as noncurrent. PAS 1, paragraph 64, provides that if an entity has the discretion to refinance or roll over an obligation for at least twelve months after the balance sheet date under an existing loan facility, the obligation shall be classified as noncurrent, even if it would otherwise be due within a shorter period. The 12% note payable is also classified as noncurrent. PAS 1, paragraph 67, provides that if the refinancing occurs between the balance sheet date and date of issue of the statements, the refinancing is a nonadjusting event, meaning, the obligation is classified as current. However, if the refinancing occurs on or before the balance sheet date, the refinancing is an adjusting event, meaning, the obligation is classified as noncurrent liability. In this case, the 12% note payable is refinanced on December 31, 2008. Problem 2-19 Answer A Accounts payable Bank note payable 10% Interest payable Mortgage note payable Bonds payable due June 30, 2009 4,000,000 Total current liabilities 6,500,000 3,000,000 150,000 2,000,000 15,650,000

The 11% bank note payable is refinanced on balance sheet date, December 31, 2008. PAS 1, paragraph 12, provides that if an obligation is refinanced on a long-term basis on or before balance sheet date, the refinancing qualifies as an adjusting event. Therefore, the 11% bank note payable is classified as noncurrent. Problem 2-20 Answer C Per book Purchase return Advances from customer Total current liabilities The adjustments on December 31, 2007 are: * Accounts payable Purchase returns * Accounts receivable Advances from customer 45,000 45,000 75,000 75,000 1,500,000 ( 45,000) 75,000 1,530,000

Problem 2-21 Answer C Share capital 5,000,000 Retained earnings Treasury shares Adjusted shareholders equity Problem 2-22 Answer A Net assets per book 8,750,000 Treasury stock Adjusted net assets 8,500,000 Problem 2-23 Answer C
Retained earnings, January 1 Income summary - net income Dividends ordinary and preference Retained earnings, December 31 550,000 500,000 (250,000) 800,000 Preference share Ordinary share Share premium RE Total SE 450,000 1,000,000 250,000 800,000 2,500,000

1,000,000 ( 750,000) 5,250,000

( 250,000)

Problem 2-24 Answer A Problem 2-25 Question 1 Answer C Cash Accounts receivable (8,000,000 2,000,000) Inventory 6,000,000 Total current assets 17,000,000 Question 2 Answer B Income before tax Income tax (35% x 5,000,000) Net income Retained earnings January 1 Total 5,000,000 (1,750,000) 3,250,000 5,000,000 8,250,000 5,000,000 6,000,000

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Problem 2-26 Question 1 Answer B Earnings from long term contract 6,680,000 Costs and expenses 5,180,000 Income before income tax 1,500,000 Less: Income tax (35% x 1,500,000) 525,000 Net income Retained earnings unappropriated Retained earnings restricted Total retained earnings Question 2 - Answer A Note payable noncurrent 1,620,000

975,000 900,000 160,000 2,035,000

The billings in excess of cost on long term contracts account is a current liability. PAS 11 requires that an entity shall present the gross amount due from customers for contract work as an asset, and the gross amount due to customers for contract work as a liability. Question 3 Answer C Cash Accounts receivable Cost in excess of billings Total current assets 5,700,000 600,000 3,500,000 1,600,000

The prepaid taxes of P525,000 actually represent the current tax expense for 2008 and therefore should be charged to income tax expense. Problem 2-27 Answer C Liabilities Share capital 5,000,000 Retained earnings (Net income of P1,000,000 minus cash 900,000

dividend of P200,000) 800,000 Total liabilities and equity Problem 2-28 Answer B Problem 2-29 Answer A Litigation loss 3,000,000 Bad debt expense (3,500,000 x 90%) Total amount of adjusting events 6,150,000

6,700,000

3,150,000

The receivable of P400,000 is nonadjusting event because the amount is still collectible although a longer term has been given but not so long as to cause it to be reclassified as noncurrent. The investments in trading securities are measured at fair value which must be determined on balance sheet date. The change in the fair value on February 15, 2009 shall be recognized in the next reporting period, not on December 31, 2008.

Problem 2-30
Easy Company Balance sheet December 31, 2008 ASSETS Current assets: Cash and cash equivalents Accounts receivable Inventories Prepaid expenses Total current assets Noncurrent assets: Property, plant and equipment Long-term investments Intangible asset Total noncurrent assets Total assets Note 800,000 450,000 900,000 200,000 2,350,000 (2) (3) 4,400,000 950,000 800,000 6,150,000 8,500,000

(1)

LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Trade and other payables Note payable, short-term debt Total current liabilities Noncurrent liabilities: Mortgage payable, due in 5 years Note payable, long-term debt Total noncurrent liabilities Shareholders equity: Share capital, P100 par Share premium (4) 450,000 200,000 650,000 1,500,000 500,000 2,000,000 4,000,000 500,000

Retained earnings Total shareholders equity Total liabilities and stockholders equity

1,350,000 5,850,000 8,500,000

10

Note 1 - Prepaid expenses Office supplies Prepaid rent Total prepaid expenses Note 2 - Property, plant and equipment Property, plant and equipment Accumulated depreciation Net book value Note 3 - Intangible asset Patent Note 4 - Trade and other payables Accounts payable Accrued expenses Total Problem 2-31
Simple Company Balance sheet December 31, 2008 ASSETS Current assets: Cash Trading securities Trade and other receivables Inventories Prepaid expenses Total current assets Noncurrent assets: Property, plant and equipment Long-term investments Intangible assets Total noncurrent assets Total assets Note (1) (2)

50,000 150,000 200,000

5,600,000 (1,200,000) 4,400,000

800,000

350,000 100,000 450,000

420,000 250,000 620,000 1,250,000 (3) 20,000 2,560,000 4,640,000 2,000,000 300,000 6,940,000 9,500,000

(4) (5) (6)

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LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Trade and other payables Serial bonds payable - current portion Total current liabilities Noncurrent liabilities: Serial bonds payable - remaining portion 2,000,000 Shareholders equity: Share capital Share premium Retained earnings Total shareholders equity Total liabilities and shareholders equity 5,000,000 500,000 880,000 6,380,000 9,500,000 Note (7) 620,000 500,000 1,120,000

Note 1 - Trade and other receivables Accounts receivable Allowance for doubtful accounts Notes receivable Claim receivable Total Note 2 - Inventories Finished goods Goods in process Raw materials Factory supplies Total Note 3 - Prepaid expenses Prepaid insurance Note 4 - Property, plant and equipment Land Building Machinery Tools Total Cost 1,500,000 4,000,000 2,000,000 40,000 7,540,000 Accum. depr. 1,600,000 1,300,000 2,900,000 Book value 1,500,000 2,400,000 700,000 40,000 4,640,000 20,000 400,000 600,000 200,000 50,000 1,250,000 500,000 ( 50,000) 150,000 20,000 620,000

12

Note 5 - Long-term investments Investment in bonds 1,500,000 Plant expansion fund Total Note 6 - Intangible assets Franchise Goodwill 100,000 Total 300,000 Note 7 - Trade and other payables Accounts payable 300,000 Notes payable 100,000 Income tax payable 60,000 Advances from customers 100,000 Accrued expenses 30,000 Accrued interest on note payable 10,000 Employees income tax payable 20,000 Total 620,000 Problem 2-32
Exemplar Company Balance sheet December 31, 2008 ASSETS Current assets: Cash and cash equivalents Trading securities Trade and other receivables Inventories Prepaid expenses Total current assets Noncurrent assets: Property, plant and equipment Note (1) 500,000 280,000 640,000 1,300,000 70,000 2,790,000 5,300,000

500,000 2,000,000

200,000

(2)

Long-term investments Intangible assets Other noncurrent assets Total noncurrent assets Total assets

(3) (4) (5)

1,310,000 3,350,000 150,000 10,110,000 12,900,000

13
LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Trade and other payables 1,000,000 Noncurrent liabilities: Bonds payable Premium on bonds payable Total noncurrent liabilities Shareholders equity: Share capital Reserves Retained earnings (deficit) Total shareholders equity Total liabilities and shareholders equity Note (6) 5,000,000 1,000,000 6,000,000 (7) (8) 7,000,000 700,000 (1,800,000) 5,900,000 12,900,000

-----------------------------------------------------------------------------------------Note 1 - Trade and other receivables Accounts receivable Allowance for doubtful accounts ( 20,000) Notes receivable Accrued interest on notes receivable Total Note 2 - Property, plant and equipment Cost value Land Building Equipment Total 1,500,000 5,000,000 1,000,000 7,500,000 Accum. depr. 2,000,000 200,000 2,200,000 Book 1,500,000 3,000,000 800,000 5,300,000 400,000 250,000 10,000 640,000

Note 3 - Long-term investments Land held for speculation Sinking fund Preference share redemption fund Cash surrender value 500,000 400,000 350,000 60,000

Total Note 4 - Intangible assets Computer software Lease rights Total Note 5 - Other noncurrent assets Advances to officers, not collectible currently Long-term refundable deposit Total Note 6 - Trade and other payables Accounts payable Notes payable Unearned rent income SSS payable Accrued salaries Dividends payable Withholding tax payable Total Note 7 Share capital Preference share capital Ordinary share capital Total Note 8 - Reserves Share premium preference Share premium ordinary 200,000 Total Problem 2-33
Relax Company Balance Sheet December 31, 2008 ASSETS Current assets: Cash Trade accounts receivable Inventories Prepaid expenses Total current assets Noncurrent assets: Note (1)

1,310,000

3,250,000 100,000 3,350,000

14
100,000 50,000 150,000

400,000 300,000 40,000 10,000 100,000 120,000 30,000 1,000,000

2,000,000 5,000,000 7,000,000 500,000 700,000

400,000 750,000 1,000,000 100,000 2,250,000

Property, plant and equipment Investment in associate Intangible assets Total noncurrent assets Total assets

(2) (3)

5,600,000 1,300,000 350,000 7,250,000 9,500,0

15

LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Trade and other payables Mortgage note payable-current portion Total current liabilities 1,750,000 Noncurrent liabilities: Mortgage note payable, remaining position Bank loan payable, due June 30, 2010 Total noncurrent liabilities Shareholders equity: Share capital Reserves Retained earnings Total shareholders equity Total liabilities and shareholders equity Note (4) 1,350,000 400,000

1,600,000 500,000 2,100,000 3,000,000 1,400,000 1,250,000 5,650,000 9,500,000

(5)

Note 1 - Trade accounts receivable Accounts receivable Allowance for doubtful accounts Net realizable value 750,000 Note 2 - Property, plant and equipment Land Building 3,000,000 Machinery 1,800,000 Equipment 300,000 Total 5,600,000 Note 3 - Intangible assets Trademark Secret processes and formulas Total Note 4 - Trade and other payables Cost 500,000 5,000,000 3,000,000 400,000 8,900,000 Accum. depr. 2,000,000 1,200,000 100,000 3,300,000

800,000 ( 50,000)

Book value 500,000

150,000 200,000 350,000

Notes payable Accounts payable Income tax payable Accrued expenses Estimated liability for damages Total

750,000 350,000 50,000 60,000 140,000 1,350,000

16
Note 5 - Reserves Additional paid in capital Retained earnings appropriated for plant expansion Retained earnings appropriated for contingencies Total Problem 2-34
Dilemma Company Balance Sheet December 31, 2008 ASSETS Current assets: Cash Trading equity securities Trade and other receivables Inventory Prepaid expenses Total current assets Noncurrent assets: Property, plant and equipment Intangible asset Total noncurrent assets Total assets Note (1) 800,000 400,000 740,000 1,000,000 160,000 3,100,000 (2) (3) 6,700,000 200,000 6,900,000 10,000,000

300,000 1,000,000 100,000 1,400,000

LIABILITIES AND SHAREHOLDERS EQUITY Current liabilities: Trade and other payables Noncurrent liabilities: Bonds payable Note payable to bank, due July 1, 2010 Total noncurrent liabilities (4) (5) 1,800,000 250,000 2,050,000 1,200,000

Shareholders equity: Share capital, P100 par, 40,000 shares authorized 30,000 shares issued Reserves (6) Retained earnings (7)

3,000,000 250,000 3,750,000

Treasury shares, at cost, 2,000 shares Total shareholders equity Total liabilities and shareholders equity

( 250,000) 6,750,000 10,000,00

17
Note 1 - Trade and other receivables Accounts receivable Allowance for doubtful accounts Dividend receivable 40,000 Total Note 2 - Property, plant and equipment Land Building in process Machinery and equipment 1,200,000 Total Note 3 - Intangible asset Patent 200,000 900,000 150,000 Cost Accum. depr. Book value 500,000 500,000 5,000,000 5,000,000 1,500,000 300,000 7,000,000 300,000 6,700,000 750,000 ( 50,000) 740,000

Note 4 - Trade and other payables Accounts payable Accrued expenses Accrued interest on bonds payable (2,000,000 x 10% x 3/12) 50,000 Liability for loss on lawsuit 100,000 Total Note 5 - Bonds payable Bonds payable Discount on bonds payable Note 6 - Reserves Retained earnings appropriated for treasury shares

1,200,000 2,000,000 ( 200,000) 1,800,00 250,000

Note 7 - Retained earnings Unadjusted balance 4,000,000 Add: Cancelation of appropriation for contingencies 150,000 Total 4,150,000 Less: Interest accrued on bonds payable 50,000 Appropriated for treasury stock 250,000 Actual loss on lawsuit 100,000 400,000

Unappropriated retained earnings 3,750,000

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Problem 2-35
Socorro Corporation Balance Sheet December 31, 2008 ASSETS Current assets: Cash and cash equivalents Trade accounts receivable Inventories Prepaid expenses Total current assets Note (1) (2) (3) 700,000 700,000 600,000 50,000 2,050,000

Noncurrent assets: Property, plant and equipment (4) 4,150,000 Long-term investment (5) 1,000,000 Investment property (6) 500,000 Intangible assets (7) 550,000 Other noncurrent assets (8) 450,000 Total noncurrent assets Total assets LIABILITIES AND EQUITY Current liabilities: Trade and other payables Serial bonds payable-current portion Total current liabilities 920,000 Noncurrent liabilities: Serial bonds payable-remaining portion Unearned leasehold income-remaining portion Total noncurrent liabilities Equity: Share capital Reserves Retained earnings Treasury shares, at cost Total equity Total liabilities and equity (10) (11) (12) (9) 820,000 100,000

6,650,000 8,700,000

400,000 280,000 680,000 5,150,000 1,050,000 1,200,000 ( 300,000) 7,100,000 8,700,000

Note 1 - Cash and cash equivalents Cash Money market placement 500,000 200,000

Total Note 2 - Trade accounts receivable Accounts receivable Allowance for doubtful accounts Net realizable value 700,000 Note 3 - Prepaid expenses Store supplies 50,000 Note 4 - Property, plant and equipment Cost Land Building Equipment 750,000 Total 4,150,000

700,000

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750,000 ( 50,000)

Accum. depr. Book value 400,000 400,000 3,500,000 500,000 3,000,000 1,000,000 250,000 4,900,000 750,000

Note 5 Long-term investment Investment in bonds 1,000,000 Note 6 Investment property Land for undetermined use 500,000 Note 7 - Intangible assets Trademark Patent Total Note 8 - Other noncurrent assets Advances to officers Restricted foreign deposit Total Note 9 - Trade and other payables Accounts payable Note payable Income tax payable Unearned leasehold income-current portion 500,000 100,000 150,000 70,000 300,000 250,000 550,000 150,000 300,000 450,000

Total

820,000

20
Note 10 - Common stock Share capital issued 5,000,000 Stock dividend payable Total Note 11 - Reserves Share premium Retained earnings appropriated for plant expansion Retained earnings appropriated for treasury share Total reserves 1,050,000 Note 12 - Retained earnings Retained earnings unappropriated Appropriation for treasury share Adjusted balance 1,500,000 ( 300,000) 1,200,000 250,000 500,000 300,000

150,000 5,150,000

Problem 2-36
Magna Company Balance Sheet December 31, 2008 ASSETS Current assets: Cash Trading equity securities Trade accounts receivable Inventories Prepaid expenses Total current assets Noncurrent assets: Property, plant and equipment Long-term investments Intangible assets Total noncurrent assets Total assets Note (1) 400,000 100,000 700,000 800,000 100,000 2,100,000 (2) (3) (4) 7,150,000 300,000 300,000 7,750,000 9,850,000

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LIABILITIES AND EQUITY Current liabilities: Trade and other payables Note payable-short-term debt Total current liabilities 1,000,000 Noncurrent liabilities: Bonds payable Note payable-long-term debt Total noncurrent liabilities Equity: Share capital Reserves Retained earnings Total equity Total liabilities and equity Note (5) 550,000 450,000

(6)

1,900,000 300,000 2,200,000

(7) (8)

2,750,000 1,450,000 2,450,000 6,650,000 9,850,000

Note 1 - Trade accounts receivable Accounts receivable Allowance for doubtful accounts Net realizable value 700,000 Note 2 - Property, plant and equipment Land Land for future plant site Building 3,400,000 Equipment 1,000,000 Total 7,150,000 Cost Accum. depr. 1,250,000 1,500,000 5,000,000 1,600,000 1,400,000 9,150,000 400,000 2,000,000 Book value 1,250,000 1,500,000 750,000 ( 50,000)

Note 3 - Long-term investments Investment in equity securities Cash surrender value Total Note 4 - Intangibles assets Franchise 100,000 250,000 50,000 300,000

Goodwill Total

200,000 300,000

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Note 5 - Trade and other payables Accounts payable Taxes payable Total Note 6 - Bonds payable Bonds payable Discount on bonds payable 400,000 150,000 550,000 2,000,000 ( 100,000)

1,900,000 Note 7 Share capital Preference share capital, P5 stated value, 300,000 shares authorized, 150,000 shares issued 750,000 Ordinary share capital, P20 par value, 400,000 shares authorized, 100,000 shares issued 2,000,000 Total 2,750,000 Note 8 - Reserves Share premium-preference 250,000 Share premium-ordinary Retained earnings appropriated for contingencies Total Problem 2-37
Summa Company Balance Sheet December 31, 2008 ASSETS Current assets: Cash Bond sinking fund Trade and other receivables Inventory Prepaid expenses Total current assets Noncurrent assets: Property, plant and equipment Investment property Intangible asset Total noncurrent assets Total assets Note (1) (2) 700,000 2,000,000 830,000 1,200,000 100,000 4,830,000 (3) (4) 5,500,000 700,000 370,000 6,570,000 11,400,000

1,000,000 200,000 1,450,000

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LIABILITIES AND EQUITY Current liabilities: Trade and other payables Bonds payable due June 30, 2009 Total current liabilities 4,050,000 Noncurrent liability: Deferred tax liability Equity: Share capital Reserves Retained earnings Total equity Total liabilities and equity (6) (7) 3,500,000 500,000 2,700,000 6,700,000 11,400,000 Note (5) 2,050,000 2,000,000

650,000

Note 1 - Cash Cash on hand Cash in bank Note 2 - Trade and other receivables Accounts receivable Allowance for doubtful accounts Notes receivable Accrued interest receivable Total Note 3 - Property, plant and equipment Land Building 3,000,000 Furniture and equipment 1,500,000 Total 5,500,000 Note 4 - Intangible asset Patent 370,000 Cost Accum. depr. Book value 1,000,000 1,000,000 5,500,000 2,500,000 2,400,000 8,900,000 900,000 3,400,000 650,000 ( 50,000) 200,000 30,000 830,000 50,000 650,000 700,000

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Note 5 - Trade and other payables Accounts payable Notes payable Accrued taxes Other accrued liabilities Total Note 6 Share capital Authorized share capital, 50,000 shares, P100 par 5,000,000 Unissued share capital Issued share capital 3,000,000 Subscribed share capital, 10,000 shares Subscription receivable Paid in capital Note 7 - Reserves Share premium Retained earnings appropriated for contingencies Total Problem 2-38
Boracay Company Balance sheet December 31, 2008 ASSETS Current assets: Cash and cash equivalents Trading equity securities Trade receivables Inventory (1,300,000 - 50,000 - 250,000) Prepaid expenses Total current assets Noncurrent assets: Property, plant and equipment Intangible asset Total noncurrent assets Total assets Note (1) 1,200,000 400,000 (2) 1,000,000 1,000,000 (3) 50,000 3,650,000 (4) (5) 3,950,000 100,000 4,050,000 7,700,000

1,000,000 850,000 50,000 150,000 2,050,000

(2,000,000) 1,000,000 ( 500,000) 500,000 3,500,000

300,000 200,000 500,000

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LIABILITIES AND EQUITY Current liabilities: Trade and other payables Noncurrent liability: Mortgage payable Equity: Ordinary share capital, P100 par Share premium Retained earnings Total equity Total liabilities and equity Note (6)

2,050,000 2,000,000 3,000,000 200,000 450,000 3,650,000 7,700,000

(7)

Note 1 - Cash and cash equivalents Cash in bank Money market placement Total Note 2 - Trade receivables Accounts receivable Notes receivable Total Note 3 - Prepaid expenses Office supplies Note 4 - Property, plant and equipment Land Building Office equipment 250,000 Total 3,950,000 Note 5 - Intangible asset Goodwill 100,000 Cost Accum. depr. 1,000,000 3,000,000 300,000 250,000 4,250,000 300,000 Book value 1,000,000 2,700,000 50,000 800,000 200,000 1,000,000 700,000 500,000 1,200,000

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Note 6 - Trade accounts and other payables Accounts payable Withholding tax payable Accrued salaries payable Accrued interest payable Total Note 7 - Retained earnings Net assets per book 4,200,000 Contributed capital Unadjusted retained earnings Unrecorded expenses: Salaries Depreciation on building (3,000,000/20 x 2) 550,000 Adjusted retained earnings 450,000 Problem 2-39
Dakak Company Balance Sheet December 31, 2008 ASSETS Current assets: Cash and cash equivalents Trading equity securities Accounts receivable Inventories Total current assets Noncurrent assets: Property, plant and equipment Long-term investment Total noncurrent assets Total assets Note 500,000 600,000 750,000 850,000 2,700,000 (1) (2) 4,000,000 2,250,000 6,250,000 8,950,000

1,500,000 100,000 250,000 200,000 2,050,000

3,200,000 1,000,000 250,000 300,000

27
LIABILITIES AND EQUITY

Current liabilities: Trade and other payables Bonds payable-current portion Total current liabilities 2,000,000 Noncurrent liabilities: Bonds payable-remaining portion Note payable, due December 31, 2009 Other noncurrent liability Total noncurrent liabilities Equity: Share capital, P100 par, 50,000 shares Share premium Retained earnings (deficit) Total equity Total liabilities and equity

Note (3)

1,500,000 500,000

(4)

1,500,000 800,000 200,000 2,500,000 5,000,000 500,000 (1,050,000) 4,450,000 8,950,000

(5)

Note 1 - Property, plant and equipment Property, plant and equipment Accumulated depreciation Net book value Note 2 - Long term investment Advances to subsidiary Note 3 - Trade and other payables Accounts payable Accrued expenses Customers deposit Total Note 4 - Other noncurrent liability Advances from officer, not repayable currently 200,000 Note 5 - Retained earnings Equity per book Contributed capital Unadjusted retained earnings Writeoff of goodwill Deficit 4,800,000 5,500,000 ( 700,000) ( 350,000) (1,050,000) 2,250,000 1,000,000 100,000 400,000 1,500,000 6,000,000 (2,000,000) 4,000,000